His critics don’t believe it will last. They figure the current boom will begin petering out as soon as mid-2019 and possibly end in recession in 2020.
“This is temporary. In fact it’s raising the odds of recession on the other side,” said Mark Zandi, chief economist at Moody’s Analytics. “The economy is now more cyclical because of the stimulus. You’re doing a lot of near-term growth, but you’re setting up for a tough time on the other side of it. That’s why most economists think we have a recession in 2020, because of these policies.”
There is plenty to worry about: A ballooning debt that will only get worse if Trump’s growth predictions don’t materialize, the increasing likelihood of a trade war that sparks inflation and punishes U.S. companies that depend on exports, and a suddenly slowing real estate market that could be pointing to larger issues at the heart of the economy.
Indeed, while Trump has preached fiscal discipline, he has not practiced it. The U.S. economy is carrying a $45 trillion debt load that continues to grow under Trump. Government debt has swollen by $1.46 trillion in Trump’s 19 months, an increase of 7.3 percent, to $21.4 trillion. The public owes $15.7 trillion of that debt, an increase of 9 percent.
Government debt since 2009
There also are some pockets of the economy that remain mired in slowness, most notably wage gains. Average hourly earnings have risen just 4.1 percent since January 2017 when Trump took office, barely keeping pace with inflation. (Still, during the same period wages rose just 3 percent under Obama.)
Then there’s the Federal Reserve, which cut rates and flooded the financial system with cash during the Obama years. Now it is reversing course and tightening, or raising rates.
“The short answer is the honest answer: Nobody knows,” Joe LaVorgna, chief economist for the Americas at Natixis, said in assessing the duration of the Trump bump. “If we generate 3.5 percent this year and generate 3.5 percent next year, that could happen provided the Fed doesn’t kill it. Then you’re going to say it looks like some of it was Trump. It has to be.”
With midterm elections fast approaching, Trump’s economic record will be front and center. The strong performance could bolster Republicans’ hopes as the GOP tries to hold onto control of both the House and the Senate.
So far, though, the experts have gotten it wrong about Trump.
LaVorgna said the final verdict in assessing the Trump performance is yet to come.
When Obama took criticism for the performance during his years, he often blamed obstructionist Republicans.
If the economy falters now, Trump will have no one to blame but himself.
“It’s very hard to disentangle all these effects,” he said. “If we do get 3 percent growth, which we haven’t had since 2005, you have to give credit where it’s due. Whether it lasts, who knows?”
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